Naira Rises Most in Month as Yields Hit Record Low at Debt Sale

The naira advanced the most in a month, rallying for a second day, after investor inflows into a Nigerian bond auction pushed yields to a record low.

The currency of Africa’s biggest oil producer rose 0.4 percent to 157.2 a dollar at 3:11 p.m. in Lagos, the commercial capital, the biggest gain on a closing basis since Nov. 19. The naira has gained 3.2 percent this year, the second-best performance among African currencies tracked by Bloomberg.

Nigeria’s 10-year borrowing costs declined to the lowest ever at the last auction this year yesterday. The 30 billion naira ($190 million) of bonds due January 2022 were sold at a marginal yield of 11.9001 percent, a record low at auction. The Central Bank of Nigeria sold $300 million yesterday at its last foreign-currency auction of the year, the most at a single sale since Aug. 8, according to data compiled by Bloomberg.

Foreign investor inflows into Nigeria’s bond market “are likely to remain consistent in the medium term,” Standard Bank Group Ltd. Africa strategists, led by London-based Stephen Bailey-Smith, wrote in a report today. “The dollar-naira interbank rate has continued to trade in a 156-158 range over the last few months. We expect this trend to persist for some time.”

JPMorgan Chase & Co. added the West African nation’s bonds to its benchmark emerging-market index series in October, predicting the inclusion may lure $1.5 billion to sub-Saharan Africa’s second-largest economy. Barclays Plc will follow from March 2013 for its own local-currency index, it said last month. Nigeria’s credit rating was raised one level on Nov. 7 to BB- by Standard & Poor’s.

Inflation Rate

The inflation rate of Africa’s biggest oil producer rose for the second month in November to 12.3 percent as the worst floods in decades cut farming output, the statistics bureau said Dec 17. The impact of the floods will probably boost inflation before price pressures begin easing early next year, Central Bank of Nigeria Governor Lamido Sanusi said on Nov. 20, after leaving the benchmark interest rate unchanged at 12 percent.

Yields on 10-year naira debt climbed one basis point to 11.89 percent in the secondary market, according to yesterday’s prices compiled on the Financial Markets Dealers Association website. Borrowing costs on the nation’s $500 million of Eurobonds due January 2021 declined two basis points to 4.1 percent.

Ghana’s cedi was unchanged at 1.8965 per dollar in Accra, the capital.

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